Stocks rise on Europe debt sales, Chinese growth

Slight improvements in Europe’s troubled debt markets and China’s economy were enough to send stocks sharply higher Tuesday. The Dow Jones industrial average was on track for its highest close since July, before the European debt crisis set off months of wrenching volatility.

Debt auctions by Spain, Greece and Europe’s bailout fund drew solid interest from investors, easing fears that recent credit-rating downgrades would prevent them from obtaining funds. The downgrades had threatened to increase borrowing costs and intensify the region’s debt crisis.

The Chinese government said earlier that its economy slowed less dramatically in the fourth quarter than analysts had expected.

Related stories

There’s so much money sitting in short-term accounts and earning zero return that even a shred of good news can jolt the market higher, said David Kelly, chief market strategist with J.P. Morgan Funds.

“The stock market is cheap, but cash and Treasurys are extremely expensive,” Kelly said. “That’s why even though people are busy taking money out of stocks and putting it into bond funds, they really should be doing the opposite.”

The Dow Jones industrial average rose 101 points, or 0.8 percent, to 12,522 as of 2:20 p.m. Eastern time. All but two of the 30 Dow stocks gained. The Dow hasn’t closed above 12,500 since July 26.

The Standard & Poor’s 500 index gained 10, or 0.7 percent, to 1,298. The S&P 500 had risen earlier to 1,303; it hasn’t closed above 1,300 since July 28.

The Nasdaq composite index added 27 points, or 1 percent, to 2,737. The market was closed Monday for Martin Luther King Jr. Day.

Carnival Corp. plunged 14 percent after a cruise ship owned by one of its brands capsized off the coast of Italy, killing 11 passengers. Italian prosecutors are charging the captain with manslaughter, causing a shipwreck and abandoning his ship before all passengers were evacuated.

Overseas markets rose earlier Tuesday after Spain auctioned off billions in short-term debt at sharply lower interest rates, indicating strong demand for the nation’s bonds. Spain’s borrowing costs had spiked in recent weeks on fears it would be engulfed by the crisis and default on its debts.

Standard & Poor’s downgraded Spain’s credit rating on Friday. The strong demand at the auction suggested that investors took the downgrade in stride.

Greece also auctioned off short-term debt on Tuesday at a lower rate than it had been paying. The fund to bail out Greece and other troubled nations also raised money, despite a downgrade on Monday.

The bailout fund’s credit rating is based on the ratings of the nations that contribute to it. It was downgraded because S&P had cut ratings for most of the nations that use the euro and back the fund.

Earlier, the Chinese government said its economic growth slowed to 8.9 percent in the fourth quarter. That was the lowest in two and a half years, but still better than the 8.7 percent predicted by analysts.